Romania: In a Mild Winter, a Strong Wind of Tax Changes

Below is a summary of the long list of tax changes applicable from 1 January 2023:

• The tax exemption for reinvested profit can also apply to assets used in production and processing, as well as assets representing re-technology, under certain conditions.
• Microenterprise income tax becomes optional. Some conditions for classification as a microenterprise are changing, namely: (i) maximum income of EUR 500,000, equivalent in RON; (ii) revenues from consulting and/or management not to exceed 20 % of total revenues (tax consulting is an exception); (iii) at least one employee; (iv) associates/shareholders own more than 25 % of the capital/voting rights in no more than three companies applying the same system.
• The 3 % tax rate for microenterprises without employees is repealed.
• The tax rate for dividends distributed to legal/natural persons increases to 8 %. This will also apply to dividends distributed/paid to privately managed pension funds and/or optional pension funds.
• Companies carrying out activities in the oil, natural gas, coal and refining sectors are obliged to pay a solidarity contribution of 60 % of the profits that exceed by more than 20 % the average profits related to the financial years 2018-2021.
• The ceiling for the 5 % VAT rate for supply of a home with a maximum usable area of 120m² is reduced to approx. EUR 122,000 (RON 600,000). It will be possible to purchase only one home with the reduced VAT rate.
• The supply of non-alcoholic beverages falling under CN code 2202 10 00 ("Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured") and CN code 2202 99 ("Others") is subject to 19 % VAT.
• For employees with a full-time employment contract, approx. EUR 40 (RON 200) per month will be non-taxable (under certain conditions) for income tax and social security contributions where the main workplace is declared.
• Several salary benefits will be subject to income tax and social security contributions if they exceed a monthly ceiling of 33 % of the base salary corresponding to the job held. These include benefits such as (i) allowances for the mobility clause (except for transporters), within the limit of 2.5 times the legal allowance for the staff of public authorities and institutions, (ii) contributions to voluntary pension funds, within the limit of EUR 400 per year per employee, and (iii) voluntary health insurance premiums / medical subscriptions within the limit of EUR 400 per year per employee, etc.
• The personal deduction from the net salary income will include: (i) the basic personal deduction (the amount and granting conditions are changed) and (ii) the additional personal deduction, newly introduced, of 15 % of the minimum gross salary for individuals younger than 26 years, under certain conditions, or approx. EUR 20 (RON 100) per month per minor child enrolled in an educational unit.
• The taxable basis for social security contributions due by individuals obtaining revenues from independent activities and intellectual property rights, increases up to 24 gross minimum wages.

These changes will be a challenge for companies to monitor and implement. Moreover, the lack of stability in the fiscal legislative framework makes it difficult for tax authorities to define uniform practices, leaving room for interpretation in the application of fiscal provisions in a permanent state of flux. One constant remains, however: Romania will continue in 2023 the long tradition of introducing many fiscal changes at the beginning of each year.

By Adriana Stoian, Managing Director Tax, Schoenherr